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Creating Buy-In without a Bailout. Creating a sense of financial ownership in a VTH. Pat LeBlanc, DVM, MS, Diplomate, ACVA Director, Veterinary Teaching Hospital Michigan State University President, AAVC. Three Motivating Factors. Motivating Factor #1 Development VTH-accepted

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slide1

Creating Buy-In without a Bailout

Creating a sense of financial

ownership in a VTH

Pat LeBlanc, DVM, MS, Diplomate, ACVA

Director, Veterinary Teaching Hospital

Michigan State University

President, AAVC

slide2

Three Motivating Factors

Motivating Factor #1

Development VTH-accepted

accounting practices.

Motivating Factor #2

Individual financial sessions

with every service

Motivating Factor #3

Input regarding distribution

of year end profit

slide3

Generally Accepted Accounting Practices

VTH Accepted Accounting Practices

V

=

/

slide4

Cost accounting is performed

on each of the following areas:

Primary Service

Support Service

Anesthesia

Central Sterilization

Clinical Pathology

Diagnostic lab

Hospitalization

Pharmacy

Radiology

Dermatology

Emergency Service (Small Animal)

Equine Med / Surgery

Food Animal Med / Surgery

General Medicine

Internal Medicine

Ophthalmology

Oncology

Orthopedics

Soft Tissue Surgery

slide5

Profit / Loss Calculation

for each Section

Motivating Factor #1 - Accepted Accounting Practices

slide6

Profit / Loss Calculation

for each Section

Motivating Factor #1 - Accepted Accounting Practices

slide7

Overhead expenses

Motivating Factor #1 - Accepted Accounting Practices

  • Three reception areas
  • Call Center
  • Purchasing
  • Laundry
  • Word Processing
  • Medical Records
  • Info Tech department
  • Business Office

Overhead pool is approx $4M

slide8

Overhead expenses

Motivating Factor #1 - Accepted Accounting Practices

3 Overhead pools

Hospital-wide

Small animal only

Large animal only

Allocation based of

sections % of VTH revenue

slide9

Motivating Factor #1 - Accepted Accounting Practices

“Primary Service Profit alone doesn’t accurately

account for what we bring in! It is not the Real Thing”

slide10

Motivating Factor #1 - Accepted Accounting Practices

How can we determine

the Real Thing?

slide11

Motivating Factor #1 - Accepted Accounting Practices

Acceptable Real Thing!!

Primary Service Profit

+

Their contribution to

support service profit

(downstream profits)

=

Real Thing!!

slide12

Motivating Factor #1 - Accepted Accounting Practices

For every $ of revenue a Primary Service generates,

how much profit in each of the support services does that $ generate?

slide13

Example:

Amount of support service revenue

generated by the Internal Medicine Service

slide14

Support service

revenue

Motivating Factor #1 - Accepted Accounting Practices

X

Support service profit margin (profit margin = Ratio of profit to revenue)

=

Support service profitgenerated by the PRIMARY SERVICE

slide16

Example:

Int. Med revenue of $250,000

$357,987

Total Allocated Service Section Profit to Internal Medicine for this period:

profit of primary service

Motivating Factor #1 - Accepted Accounting Practices

Profit of Primary Service+

Portion of Support service profit=

Total profit contribution to VTH

primary service section with allocated support service section profits

Primary service section with allocated Support service section profits

Motivating Factor #2 - Shared information

top expense items2

Motivating Factor #2 - Shared information

Top expense items

Revenue generating procedures

Profit ranking

top expense items3

Motivating Factor #2 - Shared information

Top expense items

Revenue generating procedures

Profit ranking

Top referring vet clinics

slide26

Motivating Factor #2 - Shared information

Opportunity to discuss

marketing of any or all

parts of the service

slide28

VTH Year-end profit

Projected 2008 profit of $3,843,368 was only off by $18K

slide29

Fiscal Results

Years 1 – 5 average: $1,322,124

Years 6 – 10 average: $2,985,143

year end profit distribution approved by

Motivating Factor #3 - Faculty input

Year end profit distributionapproved by:

1. Hospital Management Group

2. Section Chiefs

3. VTH Board

2008 year end distribution of profit

Motivating Factor #3 - Faculty input

2008Year End Distribution of Profit

Hospital equipment fund 25%

Academic departments 75%

equipment purchases from year end profits

Motivating Factor #3 - Faculty input

Equipment purchases from year end profits

Section Chiefs determine major equipment purchases(over $5K)

slide36

Up to date VTH financials

presented at:

Monthly Faculty meetings

Monthly “Chat with Pat” sessions

Monthly Section Chief Meetings

“Wow, no wonder

the VTH charges

are so high!!!

Quarterly Town Hall Meetings

Quarterly VTH Board Meetings

slide37

Expense cuts in past 6 months

Staff and Benefit Reductions:

Approximately $1M in salary and fringes

Elimination of VTH funded travel expenses

Other Expense Reductions:

Reduction in CareCredit options

Reduction in inventory

Moratorium on Major Equipment purchases for 2009

slide38

Those that don’t either refused to be informed and / or are “rumble strips”

Informed

employees understand staff and benefit cuts

slide39

Staff Happiness

is normally distributed

Constant

Complainers

Always

Happy

Generally Satisfied

Always happy

slide40

If you never hear any noise from the “rumble strips”, you might be headed off the road!!

Constant

Complainers

Always

Happy

Generally Satisfied

Always happy

slide41

Summary

Factor 1: Well accepted accounting

system “Real Deal”

We are far from perfect but at least we

are trying to get to the same spot.

Factor 2: Widespread Sharing

of information

Factor 3: Faculty involvement for

distribution of year end profits